USD/JPY slips below 144.00 as BOJ intervention jostles with US inflation-led woes

• USD/JPY renews intraday low, snaps two-day uptrend around 24-year high.
• Technical issues at BOJ join talks of market intervention to favor yen bears.
• Japan’s 10-year Treasury bond yields poke the upper band BOJ target range.
• US inflation-led run-up fades amid sluggish session.

USD/JPY returns to bear’s radar, after a two-day uptrend, as fears of Bank of Japan (BOJ) intervention joins strong yields during early Wednesday morning in Asia. Also exerting downside pressure on the yen pair are the mixed concerns surrounding China and the global economic slowdown.

Japan’s Nikkei news recently mentioned that BOJ reportedly conducted a rate check in apparent preparation for currency intervention. Following the news, the Japanese central bank conveyed likely delays in some settlements as some issues were identified on the BOJ network system.

Earlier in the day, Japan’s Finance Minister Shunichi Suzuki and top currency diplomat Masato Kanda raised concerns over the yen’s latest weakness while indirectly signaling brighter chances of the BOJ intervention. Also favoring the Japanese central bank’s move are the 10-year Treasury yields of the Japanese Government Bonds (JGB) as they reach the upper limit of the BOJ’s target band.

On the other hand, US Consumer Price Index (CPI) for August renewed the market’s hawkish expectations from the US Federal Reserve (Fed) and renewed the recession fears, via the inverted curve of the US Treasury bond yields, which in turn fuelled USD/JPY earlier. That said, the US CPI rose past 8.1% market forecasts to 8.3% YoY, versus 8.8% prior regains.

The US 10-year Treasury yields rallied to 3.412% and those for 2-year bonds increased to 3.76% following the data, around 3.424% and 3.771% respectively at the latest. Furthermore, the US stocks had their biggest daily slump in almost two years after the US CPI release.

On the same line could be the headlines suggesting Taiwan’s hosting of multiple foreign lawmakers in Washington to Push China sanctions and US lawmakers voting on financing arms for Taipei.

Alternatively, hopes of more stimulus from China and expectations of a solution to the European energy crisis seem to defend the steel buyers. In that regard, European Union (EU) Chief Ursula von der Leyen’s plans for the energy price capping and US Trade Representative Katherine Tai’s EU visit to meet European Commission Vice President Valdis Dombrovskis also favor cautious optimism.

Looking forward, USD/JPY may witness inaction ahead of the US Producer Price Index (PPI) and Thursday’s August month US Retail Sales. Above all, next week’s Federal Open Market Committee (FOMC) will be a crucial event for the pair traders to watch for clear directions.

Technical analysis

Despite the latest pullback, USD/JPY remains well above the 10-DMA and monthly support line, respectively around 142.50 and 141.30, which in turn keeps buyers hopeful of overcoming the 145.00 hurdle.